Corporate Financial Results - Newspaper Summary

 The Corporate Financial Results for Q2 FY26 reflect a complex period characterized by significant macroeconomic shifts in India, notably the implementation of GST reforms, coupled with ongoing global market volatility, particularly affecting trade and specific industry dynamics.

I. Performance Drivers: GST Reforms, Export Strength, and Cost Management

The Q2 FY26 results reveal key divergences, largely driven by companies’ exposure to favorable exports, effective cost management, and sensitivity to the Goods and Services Tax (GST) rate changes:

A. The Impact of GST Reforms on Consumer Sectors

The implementation of GST reforms (GST 2.0) saw price reductions across various sectors, creating a dual impact of short-term disruption followed by anticipated demand momentum:

1. Automotive Sector Gains: Hyundai Motor India (HMIL) reported a 14 per cent increase in profit after tax (PAT) to ₹1,572 crore in Q2 FY26. Revenue from operations rose slightly by 1 per cent to ₹17,460 crore.

   • Contextual Factor: Domestic car sales were initially muted as consumers delayed purchases in anticipation of the GST cut announced post-August 15. However, a "remarkable surge in sales" in the last week of the quarter, following the new 18% GST rate effectiveness (September 22), partially offset the muted demand.
   • Drivers: The bottom line was aided by a rise in other income and a drop in raw material prices. The GST reforms led to improved affordability and positive consumer sentiments, prompting an increase in consumer upgrading to larger segments. HMIL’s EBITDA margin improved by 113 basis points (bps) to 13.9 per cent.

2. FMCG Sector Disruption: Consumer goods companies faced operational challenges during the transition period:

   • Dabur India posted a consolidated net profit increase of 6.5 per cent to ₹453 crore and consolidated revenue growth of 5.4 per cent to ₹3,191 crore. However, the CEO noted that the GST rate reduction, while structurally positive, led to a "temporary disruption in trade channel" resulting in short-term moderation in sales in the India business during September. The GST impact was estimated at about ₹100 crore, or 3-4 per cent of revenue.
   • ITC's consolidated PAT increased 4.2 per cent to ₹5,187 crore (standalone net profit rose 4.09% to ₹5,179.82 crore). However, revenue from operations fell 2.4 per cent. ITC stated that the "excessive rains" and the "transition to the new GST regime" caused operational challenges and short-term business disruptions. Revenue from the non-cigarette FMCG business grew 6.93 per cent, but the segment's operating profit saw a marginal 0.32 per cent decline.

B. Strength in Exports and Global Market Engagement

For several Indian majors, robust export performance and international execution were critical drivers of Q2 results:

• Automotive and EPC: HMIL’s profitability relied heavily on a 22 per cent surge in exports, which accrue better margins (2-3% superior to domestic sales). Similarly, Larsen & Toubro's (L&T) strong Q2 show saw consolidated revenue rise 10%, driven by its Energy segment growth of 48% due to execution ramp-up in international hydrocarbon projects. L&T’s order book now has an almost 50-50 domestic versus international split, with 85% of international orders coming from the Middle East.
• Pharmaceuticals: Cipla delivered its highest-ever quarterly revenue of ₹7,589 crore (8% growth). This performance was commended for its breadth and balance, driven by contributions across all focused markets. The US business reported revenue of $233 million, and the Emerging Markets and Europe segment delivered a revenue growth of 15 per cent.
• Agri-Solutions: Coromandel International posted a consolidated net profit of ₹793 crore, up from ₹659 crore in Q2 FY25. This strong performance was aided by proactive expansion due to favorable monsoons and a strong agrarian sentiment across key markets.

II. Sectoral Challenges and Financial Volatility

Q2 FY26 also highlighted significant challenges in high-growth, asset-heavy, and financially sensitive sectors.

A. Quick Commerce Losses and Capital Needs

The quick commerce expansion segment demonstrated high investment burn rates:

• Swiggy reported a widening net loss of ₹1,092 crore for Q2 FY26, up 74.4 per cent from ₹626 crore in the corresponding period last year. This was attributed to the strain placed on the bottom line by Swiggy’s aggressive quick commerce expansion (Instamart).
• Operating revenue, however, grew significantly, reaching 54.4 per cent year-on-year to ₹5,561 crore. Total expenses rose 56 per cent y-o-y to ₹6,711 crore, led by higher delivery-related costs and advertising spend.
• Context: To maintain financial flexibility amid intensified competition, Swiggy is considering raising up to ₹10,000 crore through a Qualified Institutional Placement (QIP) and other routes.

B. Banking Sector Under Pressure

The banking sector saw mixed results, frequently citing depressed Net Interest Income (NII) and margin compression:

• Distressed Performance: Bandhan Bank’s net profit saw a dramatic fall of 88.07 per cent year-on-year, settling at ₹111.87 crore. This outcome was driven by a nearly 29 per cent fall in operating profit and a 90.12 per cent y-o-y rise in provisions. The net interest income (NII) dropped 11.76 per cent, and the Net Interest Margin (NIM) declined by 152 bps to 5.8 per cent. The bank acknowledged that performance was below internal expectations, impacted by the 75 bps repo cut in Q1.
• Public Sector Banks (PSBs):
  • Union Bank of India reported a 10 per cent year-on-year fall in net profit at ₹4,249 crore, primarily due to lower total income and a 36 per cent drop in recoveries from written-off loans. Its NII was down 3 per cent.
  • Canara Bank achieved a 19 per cent growth in net profit, reaching ₹4,774 crore, despite its NII declining by 1.87 per cent. The bank saw improved asset quality, with net NPAs declining to ₹6,113.2 crore.

C. Challenges in Manufacturing and Resources

• Coal India witnessed lacklustre Q2 performance, with consolidated revenue slipping 3 per cent to ₹30,190 crore. Production fell 4 per cent, and sales dropped 1 per cent due to a prolonged monsoon and muted power demand in the first half of FY26. Ebitda fell 23 per cent.
• Adani Power reported a consolidated net profit decline of almost 12 per cent (to ₹2,906 crore or ₹2,953 crore). This decline occurred despite power sale-volumes growing 7.4 per cent, attributed to a slightly lower pre-tax profit and a higher tax charge.
• Carborundum Universal’s consolidated PAT dropped 35 per cent to ₹75 crore. This significant reduction was primarily caused by lower profitability from its Russian subsidiary, which was impacted by international sanctions.

III. Global Contextual Developments Affecting Future Outlook

Several global and regulatory events in Q2 FY26 set the stage for upcoming quarters:

• Global Regulatory Hurdles (Pharma): Dr Reddy’s Laboratories faced a setback when Canada issued a Notice of Non-Compliance (NON) on its Semaglutide injection submission, likely delaying the first-to-market launch until the last quarter of FY26. This delay could jeopardize projected FY26 revenues of $30 million.
• IT Sector Valuation Arbitrage: Nasdaq-listed Cognizant is exploring an IPO in India to narrow the valuation gap with Indian peers like Infosys, TCS, HCL Technologies, and Wipro. Cognizant is valued at $35.01 billion, barely half of Infosys's $70.5 billion market cap, despite comparable prior fiscal year revenues. The India listing is seen as a way to access fresh financial flexibility to invest in Generative AI platforms, automation, and upskilling.
• Supply Chain Relief (Rare Earths): China approved rare earth magnet export applications for several Indian automotive component makers (including Jay Ushin Ltd, De Diamond Electric India Pvt Ltd, Continental AG, and Hitachi Astemo). This grants short-term relief to Indian companies severely impacted by the material shortage.
• Geopolitical Demand Shifts (Energy): Damages to Russian refineries and the advancing winter in Europe are expected to pump up demand for Indian petro-products through the end of March. September saw India's highest petroleum product exports so far in FY26.